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USD/CAD Strengthens To Help Dollar Bounce Off Lows

3/8/2018, 10:02:27 AMMarket Analysis
USD/CAD Strengthens To Help Dollar Bounce Off Lows

The dollar bounced off lows against a basket of major currencies as bullish private sector jobs data offset ongoing yen strength on fears over the prospect of a global trade war.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.08% to 89.63. The dollar had traded bounced from a session low of 89.36.

Private payrolls grew by 235,000 in February, according to a report released Wednesday by ADP and Moody's Analytics. That beat economists’ forecast of 195,000, and raised investor expectations for a bullish nonfarm payrolls print due Friday as ADP data often serves as precursor to nonfarm payrolls.

Hedge Fund Economics said it expects an above-consensus nonfarm payrolls reading of 230,000 in total.

The solid ADP print helped the dollar claw back some of its losses against the yen as USD/JPY traded at Y105.85, down 0.27%, but well off the lows of Y105.46. The yen had rallied sharply against the dollar earlier in the day on safe-demand after U.S. economic advisor Gary Cohn resigned from the Trump administration.

Also helping the greenback was a slump in the Canadian dollar after the Bank of Canada left rates unchanged and struck a dovish tone in it’s monetary policy statement.

“Cooling growth left little reason for Bank of Canada to rush another rate hike,” CIBC said.

CIBC added that the monetary policy statement highlighted that trade policy developments were a growing source of uncertainty, clouding the outlook for the economy and building on what has been a disappointing run in export growth. The bank maintained its call that the Bank of Canada will hike interest rates only once more in 2018.

USD/CAD rose 0.83% to C$1.2984.

EUR/USD fell 0.04% to $1.2399 ahead of the European Central Bank meeting Thursday, when the central bank is expected to stand pat on interest rates.

Investor focus, however, is likely to centre on comments from ECB governor Mario Draghi amid expectations that he may hint at plans to rein in accommodative monetary policy measures.

GBP/USD fell 0.03% to $1.3883 as stronger housing data helped ease Brexit-related angst.